Medical loans can add to the pain

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NEW YORK — The dentist set to work, tapping and probing, then put down his tools and delivered the news. His patient, Patricia Gannon, needed a partial denture. The cost: more than $5,700.

Gannon, 78, was staggered. She said she could not afford it. And her insurance would pay only a small portion. But she was barely out of the chair, her mouth still sore, when her dentist’s office held out a solution: a special line of credit to help cover her bill. Before she knew it, Gannon recalled, the office manager was taking down her financial details.

But what seemed like just what the doctor ordered has turned into a quagmire. Her loan ensured that the dentist, Dr. Dan A. Knellinger, would be paid in full upfront. But for Gannon, the price was steep: an annual interest rate of about 23 percent, with a 33 percent penalty rate kicking in if she missed a payment.

She said Knellinger’s office subsequently suggested another form of financing, a medical credit card, to pay for more work. Now, her minimum monthly dental bill, roughly $214 all told, is eating up a third of her Social Security check. If she is late, she faces a penalty of about $50.

“I am worried that I will be paying for this until I die,” says Gannon, who lives in Dunedin, Fla. Knellinger, who works out of Palm Harbor, Fla., did not respond to requests for comment.

In dentists’ and doctors’ offices, hearing aid centers and pain clinics, US health care is forging a lucrative alliance with US finance. A growing number of health care professionals are urging patients to pay for treatment not covered by their insurance plans with credit cards and lines of credit that can be arranged quickly in the provider’s office.

The cards and loans, first marketed about a decade ago for cosmetic surgery and other elective procedures, are now proliferating among older Americans, who often face large out-of-pocket expenses for basic care that is not covered by Medicare or private insurance.

The American Medical Association and the American Dental Association have no formal policy on the cards, but some practitioners refuse to use them, saying they threaten to exploit the traditional relationship between provider and patient. Doctors, dentists, and others have a financial incentive to recommend the financing because it encourages patients to opt for procedures and products they might otherwise forgo. It also ensures that providers get paid upfront — a fact that financial services companies promote.

One of the companies, iCare Financial of Atlanta, which offers financing plans through providers’ offices, asks providers on its website: “How much money are you losing everyday by not offering iCare to your patients?” In the last three years, the company’s enrollment has grown 320 percent.

Another company posted a video online that shows patients suddenly vanishing because they cannot afford treatment. The company offers a financing plan as a remedy, with the scene on the video shifting to a smiling doctor with dollar signs headed toward him.

A New York Times review of dozens of customer contracts for a variety of medical cards and lines of credit, as well as of hundreds of court filings in connection with civil lawsuits, shows how perilous such financial arrangements can be for patients.

Many of these cards charge no interest for a promotional period, typically six to 18 months. But if the debt is not paid in full when that time is up, costly rates — usually 25 to 30 percent — kick in. If payments are late, patients face additional fees and, in most cases, their rates increase automatically. The higher rates are often retroactive, meaning that they are applied to patients’ original balances, rather than to the amount they still owe.

Medical credit cards resemble other credit cards, but there is a critical difference: They are usually marketed by caregivers, often at vulnerable times, such as when patients are in pain.

In addition to companies like General Electric, large banks like Wells Fargo and Citibank, as well as several specialized financial companies, offer credit at practitioners’ offices.

The growth of this form of consumer credit is difficult to quantify. But credit cards of all types are playing a growing role in financing medical care. In 2010, people in the United States charged $45 billion of out-of-pocket expenses on credit cards, according to the consulting firm McKinsey & Co.

State authorities and care advocates in California, Florida, Illinois, Michigan, and elsewhere say older people — many of them grappling with dwindling savings and mounting debt — are running into trouble with medical credit cards and loans.

“The cards prey on seniors’ trust,” said Lisa Landau, of the New York attorney general’s office.

Minnesota’s attorney general, Lori Swanson, is investigating the use of medical credit cards, which she said could come with “hidden tripwires and other perils.”

Carl Dorsey, 74, recalled his experience at Aspen Dental Management, a nationwide chain. He said that after a dentist in Seekonk, Mass., told him he needed dentures, for $2,634, he was urged to take out a medical credit card. He was charged the full cost upfront, financial statements show.

Dorsey, who made $600 a month as a used-car salesman, in addition to Social Security, has fallen behind on payments. That set off a penalty interest rate of nearly 30 percent. He’s pursued by debt collectors.

“This whole ordeal has been devastating,” said Dorsey, who along with other patients is part of a civil lawsuit filed against Aspen in a federal court in upstate New York.